FIRST-TIME HOME BUYER CREDIT
WHO DO YOU KNOW THAT SHOULD BUY A HOME RIGHT NOW?
⇒ Payments may be lower than rent!
⇒ Home prices are amazing!
Here are the important highlights of the $8,000 First Time Home Buyer Credit of 2009:
The Treasury Department has moved at record speed to implement one piece of the new
American Recovery and Reinvestment Act of 2009 Act (also known as the stimulus act).
Forms and regulations are already in place for homebuyers who wish to claim the first-time
credit enabled under the act.
The credit is available to first time homebuyers who purchase a home before December 1,
2009.
Homebuyers can claim the credit either on their 2009 tax return or immediately on the 2008
return due in April.
The tax credit represents 10 percent of the purchase price of a home up to a maximum of
$8,000 or $4,000 for married taxpayers filing separate returns.
The $7,500 credit that was authorized under earlier legislation last year was actually a 15
year loan; the new tax credit does not have to be repaid by the homeowner under ordinary
circumstances.
The credit does have to be repaid if the homeowner sells the home in less than 36 months
or if the home ceases to be his principal residence during that time.
For the purpose of this credit, a first time homeowner is defined as one who has not
owned a home for the 36 months ending on the date of purchase.
The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000
for married taxpayers filing jointly. Above those income levels the credit is phased out
gradually.
Homeowners who purchased a house between April 8 and December 31, 2008 are not
eligible for the new credit. They are covered by the earlier legislation and can claim the
$7,500 repayable credit.
Forms and instructions for claiming the credit on 2008 tax returns are available at
www.irs.gov. The form number is 5405.
Saturday, April 4, 2009
Friday, April 3, 2009
6 Reasons Why It's Still a Good Time to Buy
6 Reasons Why It's Still a Good Time to Buy The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.
Source: The Wall Street Journal, June Fletcher (03/27/2009)
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.
Source: The Wall Street Journal, June Fletcher (03/27/2009)
Tread Carefully When Making a Low-Ball Offer
Tread Carefully When Making a Low-Ball Offer These days, it’s easier to make a low-ball offer than it used to be, but still it’s important to be smart. Here are some things that a real estate practitioner and would-be buyer should consider when contemplating such an offer:
● Use foreclosures as comps carefully. Look realistically at the prices foreclosures in the neighborhood brought. Foreclosures aren’t good comps if the homes were stripped of appliances, pipes, HVAC, etc.
● Examine details of short sales critically. How many liens were there against low-selling short sales? If there were no secondary liens, the lender had considerable flexibility.
● Establish realistic time frames. Even in the best of circumstances, foreclosure takes a long time. Will the seller play the waiting game? How long have houses whose owners have equity stayed on the market?
Is the buyer in a hurry? If your buyer makes a low-ball offer, the bank probably won’t be in any rush to take it. They’ll likely just keep soliciting offers without coming back with a counter. Ultimately, the property is likely to sell for a higher price and, chances are, you and your buyer won’t know it until the deal is done.
Source: ThinkGlinck, Ilyce R. Glink (03/30/2009)
● Use foreclosures as comps carefully. Look realistically at the prices foreclosures in the neighborhood brought. Foreclosures aren’t good comps if the homes were stripped of appliances, pipes, HVAC, etc.
● Examine details of short sales critically. How many liens were there against low-selling short sales? If there were no secondary liens, the lender had considerable flexibility.
● Establish realistic time frames. Even in the best of circumstances, foreclosure takes a long time. Will the seller play the waiting game? How long have houses whose owners have equity stayed on the market?
Is the buyer in a hurry? If your buyer makes a low-ball offer, the bank probably won’t be in any rush to take it. They’ll likely just keep soliciting offers without coming back with a counter. Ultimately, the property is likely to sell for a higher price and, chances are, you and your buyer won’t know it until the deal is done.
Source: ThinkGlinck, Ilyce R. Glink (03/30/2009)
A Record Low for Mortgage Rates, Again
A Record Low for Mortgage Rates, Again Just one week after 30-year mortgage rates fell to a record low of 4.85 percent, the average dropped even further to 4.78 percent this week, Freddie Mac reported. Refinancing activity has picked up because of the low rates, and the Mortgage Bankers Association says approximately 80 percent of mortgage applications came from borrowers seeking to refinance.
Source: Boston Globe (04/03/09)
Source: Boston Globe (04/03/09)
Big Gains in Pending Home Sales, Affordability
Big Gains in Pending Home Sales, Affordability Increases in pending home sales suggest a possible upswing in sales activity in coming months, according to the National Association of REALTORS.The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008, when it was 83.3.
Lawrence Yun, NAR chief economist, said the market is continuing to underperform. “Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he says. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”Additionally, NAR’s Housing Affordability Index rose to a new high in February. The Regional BreakdownThe PHSI picture varied across U.S. regions, with increases everywhere except the West: 1. Northeast: rose 10.6 percent to 63.9 in February but is 11.2 percent below a year ago. 2. Midwest: jumped 14.5 percent to 83.1 and is 3.4 percent higher than February 2008. 3. South: rose 4.4 percent to 85.8 in February but is 0.1 percent below a year ago. 4. West: fell 13.5 percent to 89.6 and is 1.7 percent below February 2008.NAR President Charles McMillan says home buyers are in an excellent position.
“The drop in mortgage interest rates and home prices mean the buying power of a typical family has never been better,” he explains. “If you have a good job and long-term plans, it’s unlikely that you’ll find a much better time to buy a home. This is especially true for first-time buyers who can qualify for an $8,000 tax credit this year, have a great selection of homes to choose from, and are in a favorable negotiating position.” Affordability ImprovesNAR’s Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago. The HAI shows the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.A median-income family, earning $59,700, could afford a home costing $285,600 in February with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. The affordable price is considerably higher the median existing single-family home price in February, which was only $164,600.“Obviously, potential home buyers need to be managing their existing debt effectively,” McMillan says.
“A REALTOR can counsel you on what you may be able to afford given your personal financial situation. In some cases, buyers who want to build their future through homeownership may need to start reducing their debt and improving their credit score before entering the housing market.”Last year at this time, the typical family could afford a home costing $265,600, which is $20,000 less than the current affordable price. “Homes in many areas are now selling for less than replacement construction costs — clearly, this is an abnormal situation that will change once inventory is drawn down and supply and demand come closer into balance,”
McMillan says.Yun expects housing inventories to rise through early summer from a normal seasonal pattern of more sellers appearing in the spring. “But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory,” he says. “Under these conditions, we should see price stabilization in most markets by the end of the year.”
Source: NAR (04/01/2009)
Lawrence Yun, NAR chief economist, said the market is continuing to underperform. “Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he says. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”Additionally, NAR’s Housing Affordability Index rose to a new high in February. The Regional BreakdownThe PHSI picture varied across U.S. regions, with increases everywhere except the West: 1. Northeast: rose 10.6 percent to 63.9 in February but is 11.2 percent below a year ago. 2. Midwest: jumped 14.5 percent to 83.1 and is 3.4 percent higher than February 2008. 3. South: rose 4.4 percent to 85.8 in February but is 0.1 percent below a year ago. 4. West: fell 13.5 percent to 89.6 and is 1.7 percent below February 2008.NAR President Charles McMillan says home buyers are in an excellent position.
“The drop in mortgage interest rates and home prices mean the buying power of a typical family has never been better,” he explains. “If you have a good job and long-term plans, it’s unlikely that you’ll find a much better time to buy a home. This is especially true for first-time buyers who can qualify for an $8,000 tax credit this year, have a great selection of homes to choose from, and are in a favorable negotiating position.” Affordability ImprovesNAR’s Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago. The HAI shows the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.A median-income family, earning $59,700, could afford a home costing $285,600 in February with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. The affordable price is considerably higher the median existing single-family home price in February, which was only $164,600.“Obviously, potential home buyers need to be managing their existing debt effectively,” McMillan says.
“A REALTOR can counsel you on what you may be able to afford given your personal financial situation. In some cases, buyers who want to build their future through homeownership may need to start reducing their debt and improving their credit score before entering the housing market.”Last year at this time, the typical family could afford a home costing $265,600, which is $20,000 less than the current affordable price. “Homes in many areas are now selling for less than replacement construction costs — clearly, this is an abnormal situation that will change once inventory is drawn down and supply and demand come closer into balance,”
McMillan says.Yun expects housing inventories to rise through early summer from a normal seasonal pattern of more sellers appearing in the spring. “But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory,” he says. “Under these conditions, we should see price stabilization in most markets by the end of the year.”
Source: NAR (04/01/2009)
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